Published 4:00 am, Saturday, April 23, 2005

The United States' pension insurer agreed Friday to take over all four of the underfunded pension plans at embattled United Airlines and assume the plans' $6.6 billion in liabilities -- the largest such claim in the federal agency's 31-year history.

The move by the Pension Benefit Guaranty Corp. was a victory for United, which had sought to escape the plans' financial burden by turning them over to the agency.

United says it needs to shed its pension obligations as part of its plan to emerge from Chapter 11 bankruptcy, which also includes extracting more wage cuts from its 61,000 current employees.

"It will allow the company to move forward as a sustainable, competitive enterprise for the long term," United said of the agency's decision.

The pension plans cover about 121,000 active and retired workers. United's agreement to shift the plans to the federal agency fueled talk of strikes against the carrier by one or more of its employee unions.

United's 15,500 flight attendants had threatened to strike over the pay cuts United sought, then reached a tentative, concessionary contract in January. But that agreement fell apart earlier this month.

The unions for more than 25,000 United mechanics and other ground workers also are threatening to walk out if they can't come to terms with the airline.

The IAM is taking a strike vote beginning May 3, with the results expected May 10 -- one day before a Bankruptcy Court hearing starts on United's plea to have wage and benefit concessions imposed on the workers if they can't reach agreement before then.

United's deal with the pension agency remains subject to approval by Bankruptcy Court Judge Eugene Wedoff in Chicago, who is overseeing the reorganization of United and its parent, UAL Corp.

The proposed pension handover, which was initially resisted by the federal pension agency, is causing concern among United workers and retirees that their retirement benefits could be reduced because of legal caps on how much the agency can pay out.

Under federal pension laws, the agency's benefits payout is capped at $45, 613 a year for workers who retire at age 65. It's less for those retiring at an earlier age.

United's pilots are expected to take the greatest hit to their pension benefits. They commonly earn six figures a year, and under federal law they must retire at age 60.

The pension agency said United's four plans combined are underfunded by $9.8 billion. The agency's liability, based on the portion it had guaranteed, is $6.6 billion.

United says it can't afford to keep making payments to its pension plans. The payments would total $1.3 billion this year and $4.4 billion over the next six years, the airline said in a court filing earlier this month.

However, assuming United's plans deepens the pension agency's own financial problems, which have been compounded by the troubled airline industry. Indeed, the United claim by far exceeds the agency's prior record claim -- a $3.6 billion liability from Bethlehem Steel Corp.

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The quasi-governmental agency, which is funded by employer-paid premiums, investment income and assets from failed pension plans, posted a deficit of $23 billion for its fiscal year ended Sept. 30. That deficit included estimated losses from taking over plans at United and US Airways Group Inc.

In February, the agency assumed the US Airways plans and their $3 billion liability.

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